Game sales of Tencent, which is among the game companies that have increased their earnings at high rates due to the pandemic, increased as users who were stuck at home in early 2020 turned to digital games and entertainment. In the first quarter of 2021, game revenue still increased by an impressive 17% to $6.7 billion but did not match 2020’s highs.
Overall, Tencent’s first-quarter revenue rose 25% to $21 billion, beating analyst estimates. The profit rate, on the other hand, increased by 65% annually to roughly $7.4 billion. Amidst fierce competition, the company Tencent may not be able to replicate the growth it reported in a once-in-a-generation pandemic, but is now pursuing more international users and leveraging next-generation gaming experiences to retain its title as the world’s largest gaming company.
To what does Tencent owe the growth in income rates?
In the first quarter of 2021, Tencent released its biggest ever update for the most downloaded mobile game Honor of Kings. Improved graphics and new in-game avatars led to a record number of paid users in February, according to the company.
Daniel Ahmad, the senior analyst at game research firm Niko Partners, says Tencent’s success in the pandemic reflects his “quiet pursuit of global game domination”. Ahmad said that one of the keys to Tencent’s game success was the decision to protect the brands he bought and continued: “In 2015, Tencent acquired Riot Games, the publisher of League of Legends, and is currently controlling a 40% stake in Fortnite’s developer, Epic Games.”
Tencent controls 43% of the Chinese game market
Tencent controls 43% of China’s game market, but it also faces competition among tech giants like Alibaba, ByteDance, NetEase, 37 Interactive Entertainment.
Alibaba became China’s fourth-largest mobile game publisher in 2020 due to the success of Three Kingdoms: Tactics, based on the popular Romance of the Three Kingdoms by Japanese game developer Koei Tecmo, which was first released in 1985. At the same time, ByteDance firm plans to expand in the gaming industry. Tencent says it will increase investment in game development by focusing on large-scale and high production value games that can gain global appeal. Tencent’s international gaming revenue nearly doubled in 2020 to $1.5 billion.